2018 (7) TMI 1133 - AT - Service Tax

Valuation - forward contract service - inclusion of brokerage charges, transaction charges and turnover charges etc. in assessable value - Held that - As far as the consideration of brokerage charges, it is admitted that the liability has been discharged. Since Brokerage/commission is a consideration which was paid by the client for the provisions of Forward Contract Services and that the same stands paid, the demand is not sustainable - demand set aside. Turnover charges - Held that - The Commissioner has failed to appreciate the annexures attached to the appeal memo where the books of accounts are showing the Service Tax to have been paid on the transaction charges by NCDEX. In the given circumstances, confirmation of demand of the Service Tax, which has already been discharged by the exchange on whose behalf the appellant had collected those charges and remitted to the exchange, to our opinion, is a patent error on the part of the Commissioner (Appeals) - demand set aside. Penalties u/s 78 - Held that - There was a reasonable cause on part of the appellant to not to pay Service Tax, which otherwise had been paid by the exchange on whose behalf appellant was collecting it and in fact was remitting it to exchange only for onwards discharge of liability - penalty set aside by invoking section 80 - penalty set aside. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Taxability of brokerage, transaction, and turnover charges in the value of taxable service for Service Tax payment.
2. Liability of the appellant for turnover charges post-16th May 2008.
3. Entitlement of Cenvat credit for input services.
4. Penalties under Section 76 and Section 78 of the Act.

Analysis:
1. The appellant, a service provider under the forward contract service category, charged brokerage, transaction, and turnover charges from clients. The Department alleged non-inclusion of these charges in taxable service value for Service Tax payment. The initial order confirmed the demand, but the appellate order modified it, setting aside the demand pre-15th May 2008. The remaining demand post-6th May 2008 was confirmed, with penalties under Section 78 upheld. The appellant contended they were not liable for the demand, as they remitted transaction charges to the exchange for Service Tax payment post-16th May 2008.

2. The Tribunal observed the appellant provided commodity exchange and member services, with the exchange liable for tax on exchange service and the agent on agent service. The appellant discharged liabilities for brokerage charges, making the demand unsustainable. Regarding turnover charges post-16th May 2008, the appellant acted as a pure agent, collecting charges for the exchange, which paid Service Tax. The Department failed to prove non-payment by the exchange, making the demand unsustainable. The Tribunal upheld the appellant's entitlement to Cenvat credit for input services.

3. The penalties under Section 76 were rightly set aside, invoking the proviso to Section 76. However, penalties under Section 78 were deemed unsustainable. The Tribunal found no suppression of facts by the appellant, as the exchange paid Service Tax, justifying invoking Section 80 immunity. Consequently, the penalties under Section 78 were set aside. The appeal was allowed, dropping the remaining demand, interest, and penalties, with the appellant entitled to Cenvat Credit.

4. The Tribunal pronounced the judgment on 17th July 2018, granting relief to the appellant by setting aside the demand, interest, and penalties, and acknowledging their entitlement to Cenvat Credit.